Vp

The benefits of diversification are showing through at equipment rental specialist Vp (VP.) with news of better than expected interim results.

In the six months to September, sales increased 18% to £84m as pre-tax profits leapt 21% to £10.4m. The Harrogate based firm has also invested heavily in its fleet, as capital investment soared 79% to £15.9m, though the typically weaker second half will not be quite as active.

Chief executive Neil Stothard describes the figures as a 'sector leading performance' pointing to the fact that with general construction weak, Vp has worked hard to win new business in areas such as infrastructure. Split into six operating divisions, all enjoyed sales growth, and all stepped up profits apart from Hire Station which struggled due to the sluggish construction market.

The Groundforce arm remains the most significant for Vp, here the performance was robust despite a limited contribution from the AMP5 water investment programme. UK Forks has continued its turnaround, with a recovery in the housing market helping demand for its equipment. The other star performer was Torrent Trackside, which has benefited from a five-year Network Rail contract as well as maintenance work on the London Underground.

Despite the recession, Vp has never cut its dividend so expectations of a 10.7p full-year payout provides a useful yield. Brewin Dolphin has upped its forecasts by £400,000 to a 2012 pre-tax profit of £14.7m and EPS of 25.7p. With further benefits of operational gearing to come, the shares are too low. Buy.